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March, 2015 Lena’s Case: Long Term Disability Insurance and Social Security Disability Insurance Benefits and How it Works

Lena is in her early 60’s and has an extensive work history as a cleaner and hospital dietary aide who sustained significant injuries following a motor vehicle accident that injured her wrist, ribs and sternum. Lena required surgery on her dominant wrist and was slow to heal following the surgery. Consequently, she remained out of work and collected both short and long term disability benefits from a group disability insurance policy she had through her employment.

The standards involved with establishing one is disabled through short and long term disability plans is typically much easier, initially, than the standard required in order to establish disability in a Social Security disability claim. Most policies set forth an initial standard that applies after an initial waiting period of anywhere from 3 to 5 months (ordinarily), and during which course of disability one is required to show they remain unable to perform the usual and customary duties of their ordinary occupation (or what is called an “own occupation standard”). Following the initial policy period (usually after a 12 month, 18 month, 2 year or, I’ve even seen 3 year period of time), the policy standard changes to one that is very similar to the standard required in a Social Security disability claim: proving one remains totally disabled from all manner of jobs that exist in the national economy for which one is suited by age, education and experience (or what is called an “any occupation standard”). The actual waiting periods and standards for establishing disability are established through the policy provisions (which serve as a contract of insurance), and thus in every case it is essential that one read their policy of insurance carefully (and, in every case, we obtain a copy of the policy so as to properly advise the client).

Likewise, it’s important to note that the vast majority of long term disability policies have what is called a “coordination of benefits provision.” This provision is meant to allow the long term disability carrier to recover their payments, dollar for dollar, for each month they have paid out a benefit to the extent to the claimant ultimately receives a Social Security disability income benefit. The insurance carrier will always reduce the amount they expect to receive back by the amount of any approved attorneys fees set aside and paid to the attorney for the claimant. The Social Security regulations provide that the fees are limited under the Social Security Act to 25% of the past due benefits owing, which fee may not exceed what is presently a cap set of $7,200.00. Thus, if the insurance carrier had paid out $12,000.00 in back payments on behalf of their insured, and for that same time period the Social Security Administration paid out monthly an amount equal to $10,000.00 (and, at the end of the claim, SSA set aside $7,500.00 to the attorney), then the insurance carrier would only request $7,500.00 back from the claimant. As the example above reflects, hiring a lawyer for one’s Social Security disability claim does not, in reality, cost one anything: in fact, the insurance carrier is eating the cost of the attorney’s fees.

In Lena’s circumstance, as is very typical, she was required to apply for Social Security disability income benefits as the provisions of her long term disability policy require that she pursue the claim. Given the nature and severity of Lena’s medical conditions, which limited in a significant manner the type of work she could perform (she was limited by her physicians from significant use of her dominant arm, including but not limited to the amount she could lift), the past work she had performed (which was all very labor intensive) and the fact that she had only a high school education, the presiding judge was willing to provide a fully favorable decision prior to the need to proceed to hearing based on a finding that Lena met one of Social Security’s grid rules. They in fact found that her functional limitations were more significant than the grid rule that would call for a finding that she be disabled: they deemed her to be an individual closely approaching retirement age, who did not have transferable skills, had a high school education and had a functional capacity that was more severe than the functional limitations associated with the light exertional level). Given this fact, Lena was provided retroactive and ongoing Social Security disability benefits, which primarily went to paying the long term disability carrier back for the amount they had been paying her, less the amount of the approved attorney’s fees. Again, Lena was not required to pay for the attorney’s fees: these were eaten by the insurance carrier when asking for repayment from Lena. Likewise, at the end of her claim, Lena was now receiving Medicare insurance just like a Social Security retirement recipient: given Lena was collecting Social Security disability benefits for a period longer than 24 months, she became entitled to pay a Medicare premium in her 25th month so as to be able to receive Medicare benefits just like a senior citizen.

One other benefit of the fully favorable decision is the fact that now that Lena has been found to meet Social Security’s standard for disability benefits, and is receiving primarily a Social Security disability check (with now only the small additional, minimum monthly benefit the disability carrier is required to make), there is very little incentive for her long term disability carrier to try and deny her claim: 1) they are now paying her very little per month (as the receipt of an ongoing Social Security disability benefit has greatly reduced the amount they need to pay) and 2) they see that the Social Security Administration has found that she meets their more rigorous standard for disability (and so who are they to determine, at the time of their redetermination when the policy standard changes from her own occupation to any occupation, that she does not mean that very similar standard).